The Impact Of Economic Policy Uncertainty On Inter-industry Risk Spillover In Stock Market

With the accelerating process of global economic integration and industrial integration,the relationship between Chinese stock market industries is getting closer and closer.In addition to the accumulation of risks in the financial industry,shocks and difficulties encountered in the real industry may lead to systemic risks.At the same time,the investment strategies of investors are easily influenced by economic policies,thus affecting the spread of risk between stock markets.This may be due to the inadequate supervision of China’s stock market and the lack of professional financial knowledge among most investors.Therefore,it is of great significance to study the impact of economic Uncertainty Index(EPU)on Chinese stock market risk for stock market regulation.Based on this,this paper studies the heterogeneous and asymmetric effects of China’s economic policy uncertainty on the systemic risks of 24 sectors in the stock market.Firstly,Tail Event Driven Network(TENET)and rolling window analysis are used to measure the dynamic tail nonlinear risk spillover between stock market industries.By using complex network technology,this paper compares the network structure of stock market in different periods,which can provide reference for investors to formulate investment strategies to avoid risks.The conclusions are as follows:(1)when crisis events occur,the tail risk spillover effect of stock market increases significantly,and the risk spillover network becomes closer.(2)The business and professional services industries are mostly risk carriers in times of crisis;with the development of information technology and the advent of digital era,software and service industry,technology hardware and equipment industry from the original risk receiver to risk transmitter.The financial industry mostly acts as a risk transmitter.Based on the risk spillover index measured above,Quantile-on-Quantile regression(QQR)is selected to study the heterogeneous and asymmetric effect of EPU on the systemic risk spillover index of China’s stock market.The results show that:(1)The influence of EPU on the systemic risk spillover index is quite different at different quantile,which indicates that the effect of EPU on the stock market risk spillover is asymmetric.In general,when EPU is at a low level,EPU will inhibit systemic risk spillover in the stock market in most cases,but when EPU is at a high level,EPU will significantly promote systemic risk spillover(2)The heterogeneity of EPU was studied by selecting software and service industries,public utilities and energy industries.This paper found that public utilities and energy industries were more sensitive to EPU and had greater fluctuations.The impact of EPU is also asymmetrical for each industry.According to the above research conclusions,when the stock market is in different states,the impact of economic policies uncertainty on its risks is asymmetric and heterogeneous.Based on this,this paper tries to put forward policy suggestions from the perspectives of investors,regulators and policy makers.